What Happens If You Miss Your Required Minimum Distribution?

Missing your RMD deadline is one of the most expensive tax mistakes you can make, and the penalty is severe. The IRS charges a 25 percent excise tax on the amount you should have withdrawn but did not, though the penalty drops to 10 percent if you correct the mistake within two years. For example, if your RMD was $10,000 and you skipped it entirely, you could owe a $2,500 penalty on top of any income tax due once you do take the distribution. You can request a waiver of the penalty by filing IRS Form 5329 and attaching a letter explaining why you missed the deadline, and the IRS does sometimes grant relief for reasonable errors. Acting quickly to take the missed distribution and correct the mistake gives you the best chance of reducing or eliminating the penalty.